Your new premium smartphone could get more expensive

Prices of premium and high-end smartphones are set to get at least 5% more expensive, driven by use of more powerful and complex chipsets for AI use cases along with more powerful memory modules and other components.

Leading chipset companies — Qualcomm and MediaTek — have guided gross margins on mobile phone chipsets to go down in the December quarter due to increasing wafer costs.

Taiwanese chipset maker TSMC is raising costs for leading-edge 5nm and 3nm processors that are majorly utilised by smartphone chipmakers. Meanwhile, chipset designer ARM is also raising licensing costs for companies like MediaTek, even as it is embroiled in a lawsuit against Qualcomm for its use of custom CPU cores in its latest generation mobile chipset.


Experts believe Qualcomm will likely settle ahead of the hearing in December, with ARM pushing to raise license fees with Qualcomm as well.

The chipset manufacturing cost increase may very well be passed down to consumers as chipmakers said it will look to maintain its current gross margins, executives said.

“I think our goal is trying to maintain the growth margin within the range, which is 46% to 48%. For next year, in general, I guess that's still going to be our range. We’re trying to sell our value and pass down some of the costs to our customers. I think that still remains our strategy and goal,” said David Ku, chief financial officer, MediaTek, during a recent earnings call.

Industry executives said the latest generation chipsets, set to power incoming high-end Android handsets, are already around 20% more expensive than their predecessors due to a more complex circuitry and advanced manufacturing process. High demand for premium handsets is also contributing to improving the product mix of chipset makers towards more high-end chipsets.

“The big story for us has been content increase. We've kind of seen the chipsets becoming a lot more capable. And as those solutions get adopted, we get to see the benefit on the ASP side,” Akash Palkhiwala, CFO, Qualcomm, said in a recent earnings call.

The executive added that devices priced higher than $400 have gone up from being 21% of the market to 30% of the market, which is benefiting the company’s financials.

“We launched our new premium-tier chipset, and the OEMs are actively taking advantage of it by accelerating their launches and really increasing the scale of their launches,” the executive said.

Counterpoint Research in a note said globally, smartphone average selling prices are expected to rise 3% on-year to $365 in 2024, and further to 5% on-year in 2025.

“This increase is attributed to several factors including the ongoing transition to 5G technology, enhanced computing capabilities, and a notable shift towards premium smartphones,” Counterpoint Research said, adding that rising consumer interest for GenAI in 2025 will drive the trend shift towards more powerful processors, increasing the bill of materials (BoM).

“A primary contributor to this escalation is the SoC,” the research firm affirmed, adding that the costs associated with wafer manufacturing are expected to rise starting in 2025, leading to single-digit percentage increases in price of high-end chipsets from Qualcomm and MediaTek.

Market trackers also see rising cost of memory modules as a crucial factor towards a surge in prices.

“From Q3 2023 to Q2 2024, spot prices of DRAM and NAND increased by more than 60% on average. The GenAI trend will likely drive the adoption of higher-performance DRAM and NAND...relatively more expensive compared to previous solutions,” Counterpoint said.